Hertler Market Signal Update

#698 February 22, 2015

The Smart Money Index is becoming bearish

The Smart Money Index climbed through the 50-day moving average to resistance at the 200 day moving average. The 50-day moving average was above the 200-DMA only briefly before slipping below. Because of the inverse relationship with stock prices the improving strength in the SMI should be bearish for stocks.

The late market component (LMC) of the Smart Money Index rallied right through the descending 50-day moving average. The lower lows and lower highs shown by the LMC is bullish considering the current inverse relationship between the LMC and the S&P 500 Index. But, the renewed strength in the LMC is bearish.

The EMC (early market component of the SMI) broke below the 50-day moving average, which is bearish.  Although in theory the EMC is supposed to represent the dumb money – the emotional traders – it is apparent that the EMC correlates very well with the S&P 500. Thus, the crossing of the 50-DMA below the 50-DMA is bearish. A crossing of the 50-DMA above the 200-DMA (as appears to imminent) would reinforce the growing bearish picture.

          Barron’s Confidence Index slipped to 78.4, but it remains above the 50-week moving average which is bullish.

The small cap/DJIA ratio remains within the confines of its rising wedge. A new confirmed up-trend would be a bullish indication. But, with the Russell 2000 at a high and the ratio far below its high, there is a bearish divergence.

            The ratio of the NASDAQ Composite to the S&P 500 and the NASDAQ Composite both rose to new highs. The NASDAQ and the NASDAQ/S&P 500 ratio are thus in synch, which is bullish.

          The AAII Member Bullish Oscillator turned up with the market.  Above zero, it is in bearish territory.

            The Citigroup Panic/Euphoria Model (from Barron’s) at +0.11 definitely is rising but far from the euphoria that we saw earlier during the S&P’s long advance. It is still bullish.

            The Fear Index climbed to a new high as stocks make new bull market highs.  It remains bullish.

          The Interday Volatility of DJIA plunged below the 200-day moving average and is becoming bearish.

            The Intraday Volatility of the DJIA plunged to a bearish level.




The Smart Money Index and its components are becoming bearish.

The Citigroup Model is still bullish.

The AAII members’ bullish oscillator turned up and has become more bearish

The relative strength of the small caps is in a short term rising channel, but has diverged from the small cap index.

The relative strength of the NASDAQ is bullish.

The Fear Index is remains bullish.

Inter- and Intra-Day Volatility of DJIA are becoming bearish rapidly.